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Unit 3: Kinds of Companies

Every member of a company, association or partnership carrying on business in Notes
contravention of this section shall be personally liable for all liabilities incurred in such
business.
Every person who is a member of a company, association or partnership formed in
contravention of this section shall be punishable with fine which may extend to one
thousand rupees.
Any seven or more persons, or where the company to be formed will be a private company,
any two or more persons, associated for any lawful purpose may, by subscribing their
names to a memorandum of association and otherwise complying with the requirements
of this Act in respect of registration, form an incorporated company, with or without
limited liability.

3.10 Keywords

Company Limited by Shares: A company limited by shares is a registered company having the
liability of its members limited by its memorandum of association to the amount, if any, unpaid
on the shares respectively held by them.
Government Company: Section 617 defines a Government Company as any company in which
not less than 51% of the paid-up share capital is held by the Central Government, or by any State
Government.
One Man Company: A member may hold virtually the entire share capital of a company. Such
a company is known as a ‘one-man company’.

Private Company: A private company can be formed by merely two persons by subscribing
their names to the Memorandum of Association.
Subsidiary Company: A company over which control is exercised by that other company is
called the Subsidiary Company.

3.11 Review Questions

1. State the various classes of companies that can be formed under the Act. Explain the
characteristics of each.
2. Define a ‘Private Company’. State the special privileges and exemptions enjoyed by a
private company.
3. Define a public company. Distinguish between a private company and a public company.
4. What is your opinion on: “There are five members in a public company”?
5. What does a private company have to do in order to become a public company?
6. “A company can be incorporated under the Companies Act without the suffix ‘limited’ or
‘private limited’, as the case may be”. Discuss.
7. “A Government Company is governed by the same legal provisions as any other company
registered under the Companies Act.” Discuss.
8. Explain there may be a company without a share capital.
9. Describe a one-man company is perfectly a valid company.
10. Write explanatory notes on:

(i) Government Company

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